Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) When
the subdivider undertakes to provide goods and/or services to the Association or to
pay a portion of a purchaser's share of the Association's financial obligations, the
subdivider shall:
(1) Enter into a contract with
the Association acceptable in form and content to the Commissioner which shall
specify in detail the obligations which the subdivider will undertake to fulfill
and, if applicable, the methods to be employed in valuing the goods and services
furnished under the program, and cover the release and enforcement of the security
referred to in (a)(4), below.
(2)
Furnish the Association with an executed copy of the contract, the security referred
to in (a)(4), below, and the escrow instructions referred to in (c), below, within
ten days after the closing of the first sale (or lease) of subdivision
interests.
(3) Submit a monthly
accounting to the Association and if the subsidy is other than cash, it shall also
contain a description and valuation of the goods and services for the common area
furnished directly by the subdivider or contracted and paid for by him.
(4) Furnish a bond to the Association as obligee
or other device to secure the subdivider's undertaking to the Association and the
owners under the program. The bond or other device shall be in an amount and subject
to terms and conditions which will assure prompt and faithful performance of the
contract. The penal sum of a bond shall not ordinarily be reduced by reason of the
fact that the subdivider has posted a bond or other security device pursuant to
Section 2792.9 of these
regulations.
(b) The
Commissioner will not ordinarily approve any program in which the subdivider
undertakes to provide goods and/or services to the Association or promises to pay a
portion of a purchaser's share of the Association's financial obligations unless it
provides for the accumulation by the Association of reserves for replacement and
major maintenance in accordance with accepted property management
practices.
(c) The security device
referred to in (a)(4) above shall be delivered to a neutral escrow depository
acceptable to the Commissioner along with an executed copy of the contract and
instructions to the depositary signed by the subdivider and the Association covering
handling of the security, return of the security to the subdivider, and remittance
of the security to the Association, including the following:
(1) The escrow instructions shall include a
procedure under which the security shall be returned to the subdivider upon the
Association's failure to give the escrow depository within 40 days the Association's
written objection to return of the security, but only if the subdivider's demand for
return of the security is accompanied by the subdivider's written statement that the
subdivider has faithfully performed all of the subdivider's obligations under the
contract.
(2) The escrow instructions
shall include a procedure under which all or some specified portion of the security
shall be paid to the Association upon the subdivider's failure to give the escrow
depository within 40 days the subdivider's written objection to payment of the
security, but only if the Association's demand for payment of the security is
accompanied by the Association's written statement that the subdivider has failed to
perform the subdivider's obligations under the contract.
(3) The escrow instructions shall provide that, in
the event the escrow holder receives conflicting instructions from the subdivider
and the Association, the escrow holder is authorized, in its sole discretion, to (1)
interplead the security or (2) retain the security until the security is disposed of
in accordance with (i) the joint or mutual instructions of the subdivider and the
Association, (ii) the order of a court of competent jurisdiction or (iii) in
accordance with the final binding decision rendered in an alternative dispute
resolution proceeding.
(4) If the
security is a letter of credit, the escrow instructions shall include a procedure
under which the escrow depository shall draw upon the letter of credit prior to the
expiration of the time for drawing thereupon, or upon the subdivider's failure to
give the escrow depository within 40 days the subdivider's written objection to
remittance of the security to the Association.
1. Repealer and new
section filed 1-16-76; effective thirtieth day thereafter (Register 76, No. 3). For
prior history, see Register 66, No. 25.
2. Amendment of section and NOTE
filed 12-30-97; operative 1-29-98 (Register 98, No.
1).
Note: Authority cited: Section
11001,
Business and Professions Code. Reference: Section
11018.5,
Business and Professions Code.
